Louisiana Play a ‘Company Maker?’

By Louise S. Durham

North Louisiana has a long, rich history of hydrocarbon production that literally started with a near bang – and another explosion of activity may be coming there soon.

Its production history began with the 1905 discovery of the Caddo Pine Island field, which continues producing today – but natural gas was first discovered in Caddo Parish in 1870 when a night watchman struck a match near a water well being drilled for a nearby Shreveport ice plant.

The watchman apparently survived.

More important, gas from the well was piped to the plant for illumination – the first use of this fuel that the state now produces (and consumes) in large quantities.

Fast forward to the fairly recent discovery of a potentially huge natural gas resource in the Upper Jurassic Haynesville Shale deposits in North Louisiana. That’s why some suggest the best may be yet to come.

Indeed, the new Haynesville Shale play is being touted as the harbinger of what may become a whole new era of prolific gas production in the region.

Unfamiliar territory? North Louisiana’s Haynesville Shale play is opening up a new part of the state to exploration activity – and drilling success. Above, the Glorias Ranch 16 No. 1. Photo courtesy of Cubic Energy

The play is the latest in a string of gas shale plays to kick off in the United States now that these usually complex reservoirs can be produced economically owing to high commodity prices for the most part. A better understanding of the technology needed to complete and produce these unconventional reservoirs plays a key role in the action.

The Haynesville Shale in North Louisiana first made major headlines in March when Chesapeake Energy released information about a natural gas discovery. That news followed a November 2007 announcement of another Haynesville Shale discovery made by Cubic Energy – prompting AAPG member Rick Sepulvado, Cubic’s vice president of E&P, to refer to the play as a co-discovery.

The Chesapeake media release noted:

“Based on geoscientific, petrophysical and engineering research during the past two years and the results of three horizontal and four vertical wells drilled, Chesapeake believes the Haynesville Shale play could potentially have a larger impact on the company than any other play it’s participated in to date.”

The play’s true magnitude likely won’t be known anytime soon.

“The most accurate picture of the Haynesville’s true potential will be best determined as time goes on and more operational data is gathered and analyzed,” said Tom Price Jr., senior vice president of corporate development at Chesapeake.

“Most shale plays require years of investment and development before their full potential is quantifiable.”

Sepulvado’s assessment was more direct:

“This play,” he said, “absolutely has the potential to be a company maker.”

Wanting to Get In

Today there’s a near-frenzy of leasing activity related to the Haynesville in this part of the world, where Chesapeake already holds 200,000 acres with a reported goal to snap up another 300,000 acres.

Resource potential for the company is said to range from 7.5 tcf on up to 20 tcf, depending on the ultimate size of the leasehold.

Petrohawk Energy is citing some big numbers for the play as well.

“We have about 150,000 acres now, and we estimate in the range of six tcf net to Petrohawk in terms of what we call our resource potential,” said AAPG member Dick Stoneburner, COO at Petrohawk.

“That’s using about 40 to 50 bcf recoverable per section,” he added. “It’s conjecture at this point as to what the recovery factor and the actual G-I-P numbers are.”

Stoneburner noted the shale clearly is present beneath Petrohawk’s entire 35,000 net acres at Elm Grove field, which historically has been the company’s largest producing property, where it produces natural gas from the Hosston and Cotton Valley formations.

At press time, Petrohawk was drilling a lateral in its first horizontal well in the Haynesville Shale in the Elm Grove area.

Barnett Comparisons

As might be expected with such a new, potentially humongous play, rumors are rife – and some of them kind of border on the bizarre.

“There’s a lot of talk going around that this is all a big hoax and that Chesapeake doesn’t have anything,” said Jim Welsh, commissioner of the Louisiana Office of Conservation. “We can’t verify resources, but it doesn’t take rocket science if someone is paying from what I hear up to $10,000 a royalty acre, for Lord’s sake, to know they’ve got something.

“It’s not a big geological secret that this may be the source bed for the Cotton Valley and Hosston overlying the Haynesville,” Welsh said. “It’s economical to get now with gas about $11 – all that probably is in this equation.”

Although Chesapeake currently is staying mum for the most part, industry scouts and other folks, including landowners, apparently have gleaned enough information to be somewhat up to speed on how the company’s wells are performing.

Comparisons are being made to the hugely successful Barnett Shale play not far to the west in Texas.

“Those (Chesapeake) wells are making a lot of gas, and one of the main things that separates this stuff from the Barnett is there’s no huge decline in production,” Sepulvado said. “After a big Barnett frac, they fall off quick, but these don’t fall back – they’re choked back and could be doing even better.

“The only question now is in the Barnett they’re getting about 20 percent recovery,” Sepulvado said, “and this is looking like more toward 30 percent.

“You have a much thicker interval than the Barnett, and some of the values are better, like porosity and TOC,” he noted. “It’s a lot deeper (in the range of 11,000 to 12,000 feet), thicker and better parameters than the Barnett.”

How Big is Big?

When Cubic drilled the Gloria’s Ranch #1 well and the Daniels 3 #1 well at its Johnson Branch Field in Caddo Parish, the company brought in Schlumberger’s Platform Express and elemental capture spectroscopy (ECS) logging tools to determine the presence and estimated quantity of shale gas resources in the Bossier/Haynesville shales in the wellbore.

The reservoir characteristics were determined to be similar to the productive reservoir characteristics of the Barnett, Fayetteville and Woodford shale gas plays.

“In doing the ECS, you’re doing mass spectrometry in the ground,” Sepulvado said, “where with other tools you’re inferring what elements are there.

“The ECS actually does volumetrics in the reservoir,” he added, “and you combine this with Platform Express to get porosity and other things. You’re basically calculating total gas in the rock and how much of it is free gas versus adhered.”

Log analysts identified two zones in the Gloria’s Ranch #1 well having a combined estimated 147 bcf total shale gas and 115 bcf free shale gas per square mile of reservoir. Two geologically equivalent zones in the Daniels 3 #1 well were estimated to contain a combined 136 bcf total shale gas and 109 bcf free shale gas per square mile of reservoir.

Cubic kicked off its fourth Haynesville Shale well June 2 headed for a depth of close to 12,000 feet at the Bethany Longstreet Field. The company plans to complete the vertical well in the Haynesville and drill out horizontally at a later date.

Technology aside, this play is much too new for operators to feel they have their arms even partway around it.

“We’re right at the beginning of this thing,” Sepulvado said, “and it’s even a darker mystery than the Barnett – at least people knew where the Barnett was because wells were drilled all over the place.

“A really big question is how far out does this go.”

All of DeSoto Parish reportedly is a major target region along with the middle and southern parts of Caddo and Bossier parishes, most of Red River Parish and the upper reaches of Sabine and Natchitoches parishes – even sections of East Texas are included.

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Haynesville Has the Big Money Flowing

The brand new Haynesville Shale gas play in North Louisiana is off to a rip-roarin’ start with lots of companies scrambling to grab a leasehold in the area.

The action is hot ‘n’ heavy, but at the moment the unknowns appear to outweigh the knowns.

“The jury is out on how big this is and how good it will be,” said Louisiana Oil & Gas Association president Don Briggs in Baton Rouge.

“On the other side of the coin is when I sit back and I look at a company like Shell in there playing pretty heavy – well, to see Shell operating on a land based play like that tells me they have pretty good feelings about it,” Briggs noted. “And we know how strong Chesapeake is, Petrohawk, Questar – I think there’s close to 40 companies up there playing it right now.

“Certainly the blood’s in the water, the sharks are swimmin’ and it’s going crazy up there.”

A Word of Caution

Despite Briggs’ enthusiasm and excitement over the play and what it could mean to the state in terms of jobs, tax revenue and more, he emphasized the need to be aware of the longstanding industry activity in the region and to proceed accordingly.

“The tests they’ve had up there clearly are substantial enough to justify the obvious investment of serious money going on,” Briggs said.

“My concern is you also have up there a mature oil and gas industry that’s been there for many, many years,” he said, “and I’m hoping that industry will not get forgotten or swallowed by these operations taking place.

“When leases get bought up at prices that normally would be $150 per acre and now are $2,000, maybe $3,000 an acre,” Briggs said, “the kinds of deals those gentlemen up there are used to drilling can’t justify those kinds of leases.

“It’s important that the new players are aware of the needs of local operators who have been there for years,” Briggs noted. “I think they are – the ones I’ve talked to are.”

‘Midst all the action, landowners are organizing and meeting in groups to get a better handle on how to deal with the potential lessors who come knocking at the door and what the future may hold for their communities once widespread drilling begins.

“State regulatory agencies are going to be looking at going up there and meeting with the people as well,” Briggs said. “A lot of people are being introduced to the oil and gas business that have never been involved before.”

Some folks appear to have adjusted quickly.

“There’s a lot of guys that had goat ranches that are now building homes in Reno,” Briggs said. “That’s the Haynesville Shale right now.”